Setting Up Multi-Party Computation for Private Asset Swaps

Multi-Party Computation (MPC) is a cryptographic protocol that allows multiple parties to jointly compute a function over their private inputs without revealing those inputs to each other. In the context of private swaps, this means two users can exchange assets—like swapping 1 ETH for 1000 USDC—while keeping their wallet balances, transaction amounts, and sometimes even the asset types confidential from external observers and the counterparty. Unlike zero-knowledge proofs (ZKPs), which prove a statement is true without revealing the data, MPC focuses on the collaborative computation itself, distributing the secret signing key across participants.

The most common application for private swaps is threshold signature schemes (TSS). Instead of a single private key controlling funds, the key is split into secret shares held by the participating parties (often the two traders and possibly a network of nodes). To authorize a swap transaction, a predetermined threshold of parties (e.g., 2 out of 3) must collaborate to produce a valid signature. No single party ever reconstructs the full key. This process, known as signing ceremony, ensures that the swap execution is trust-minimized and private, as the transaction appears on-chain as a simple transfer from a fresh, non-custodial MPC wallet.

Setting up an MPC system requires choosing a protocol and library. For developers, GG18 and GG20 are popular threshold ECDSA protocols for Bitcoin/Ethereum-compatible signatures. Libraries like ZenGo's multi-party-ecdsa or Coinbase's tss-lib provide implementations. A basic setup involves initializing a key generation ceremony where each party runs a client that generates their secret share and engages in several rounds of communication to create a shared public address. This address, whose corresponding private key exists only in distributed shares, becomes the escrow for the swap.

Here is a simplified conceptual flow for a 2-party ECDSA key generation using tss-lib:

goCopy
// Parties initialize parameters
params := tss.NewParameters(tss.S256(), partyIDs, partyID, len(partyIDs), threshold)
// Start the key generation protocol
outCh := make(chan tss.Message)
endCh := make(chan *common.ECDSASignatureData)
go keygen.Start(params, outCh, endCh, nil)
// Parties exchange messages via P2P layer, resulting in a key share and public key

The critical development challenge is implementing the secure peer-to-peer messaging layer between parties, often using encrypted WebSocket connections.

For a private swap, after the MPC wallet is created, the process follows an atomic swap pattern using Hashed Timelock Contracts (HTLCs) or adaptor signatures. Each party deposits their asset into the shared MPC address. The MPC protocol then generates a signature that atomically authorizes two transactions: one releasing Asset A to Party B and another releasing Asset B to Party A. Because the signature generation uses secret shares, neither party learns the other's final transaction details until the blockchain reveals them. This prevents front-running and protects privacy.

Major considerations when implementing MPC swaps include latency from multiple communication rounds, robustness against party dropout, and security of the underlying cryptographic assumptions. Projects like RenVM (using Shamir's Secret Sharing) and Web3Auth (for key management) demonstrate real-world applications. While complex, MPC provides a powerful, non-custodial foundation for private decentralized finance, moving beyond mixer-based privacy to computation-based confidentiality.

A functional development environment is the first requirement. You will need Node.js 18+ or Python 3.10+ installed, as most MPC libraries are built for these runtimes. Essential tools include a package manager like npm or pip, git for version control, and a code editor such as VS Code. For blockchain interaction, you must have access to an RPC endpoint for the networks you intend to use (e.g., via Alchemy, Infura, or a local node). A basic understanding of command-line operations is assumed.

The cryptographic backbone of private swaps relies on specific libraries. For threshold ECDSA or other MPC protocols, you will need to integrate SDKs like ZenGo's Multi-Party Schnorr Signatures, Curv's MPC library (now part of Coinbase), or Sepior's Threshold Signatures. These libraries handle the distributed key generation and signing ceremonies. Additionally, you must install a general-purpose cryptographic library such as libsodium or the crypto module in Node.js for hashing and symmetric encryption tasks.

Your application's architecture must support secure, persistent communication between parties. This typically involves setting up a signaling server using WebSockets (e.g., with Socket.IO) or a decentralized alternative like Waku or Matrix to facilitate the initial peer discovery and session establishment for the MPC protocol. Each participant's client must be able to run computational rounds, exchange encrypted messages, and maintain state locally without exposing private shares.

Finally, you need the correct smart contract interfaces on-chain. For asset swaps, this means having the ABI and address for the relevant ERC-20, ERC-721 token contracts, and the swap contract itself (e.g., a hashed timelock contract or a dedicated privacy-preserving AMM). You should use development frameworks like Hardhat or Foundry for testing, and have testnet ETH or tokens (e.g., on Sepolia or Goerli) to deploy and interact with contracts during development.

Multi-Party Computation (MPC) enables multiple parties to jointly compute a function over their private inputs without revealing those inputs to each other. For a private asset swap, this means two users can agree to exchange tokens if and only if their secret conditions are met, without a trusted intermediary learning the trade details. The core cryptographic primitives used are secret sharing, where a private value is split into shares distributed among participants, and secure function evaluation, which processes these shares to produce a result. This creates a cryptographic "black box" where the swap logic executes confidentially.

To set up a basic 2-party swap, you first define the computation circuit. This circuit encodes the swap logic: checking that Party A's input (e.g., a secret commitment to 10 ETH) and Party B's input (e.g., a commitment to 3000 USDC) are valid, and that both parties agree to the exchange. Libraries like MP-SPDZ or ABY provide frameworks for writing these circuits. A typical flow involves an offline phase where correlated randomness (like Beaver triples) is generated to mask inputs, and an online phase where parties exchange masked data to compute the result. The final output is the authorization to atomically settle the swap on-chain, often via a smart contract that verifies a zero-knowledge proof of the correct MPC execution.

Implementing this requires careful setup. Each party runs an MPC node, often using a protocol like GMW (Goldreich-Micali-Wigderson) for Boolean circuits or SPDZ for arithmetic circuits. For a concrete example, using the franklin-crypto MPC library in Rust, you would define the swap as a function that takes secret-shared inputs [a] and [b] and returns a shared output [swap_valid]. The code would use secure addition and multiplication gates on these shares. Communication between nodes is secured via authenticated channels (e.g., TLS), and the protocol ensures that compromising one node reveals nothing about the other party's secret amount or identity.

The primary security model assumes a honest majority or dishonest majority depending on the protocol. For two parties, we often assume at least one is semi-honest (follows the protocol but is curious). Adversarial models are critical: a malicious party may abort the protocol or input incorrect data. Robust MPC protocols use commitment schemes and verifiable secret sharing to detect cheating. The final settlement leverages a blockchain as a tamper-proof broadcast channel and commitment device. The smart contract acts as the judge, receiving the MPC output (a single bit confirming the swap) and executing the token transfers atomically, ensuring neither party can back out after learning the other's terms.

Practical considerations include performance and network assumptions. MPC is computationally intensive; a simple swap circuit may require several rounds of communication and hundreds of milliseconds to compute. For production use, consider optimized protocols like SPDZ2k or use hardware enclaves (SGX) for faster preprocessing. Always audit the cryptographic implementation and the circuit logic. Real-world systems like Penumbra and Arcium utilize MPC variants for private DeFi. By combining MPC with zero-knowledge proofs, you can further compress the on-chain verification step, reducing gas costs while maintaining strong privacy guarantees for both trading parties.

A Multi-Party Computation (MPC) protocol for private swaps enables two parties to exchange assets on-chain without revealing their secret inputs—like the exact swap amount or their private key—to each other or a central server. The core cryptographic primitive is a threshold signature scheme (TSS), where the signing key is distributed as secret shares among the participants. No single party holds the complete key, preventing unilateral control. For a swap, this shared key controls a multi-signature wallet on the blockchain (e.g., an Ethereum smart contract wallet). The swap's execution is contingent on both parties collaboratively generating a valid signature, which is only possible if the pre-agreed swap conditions are met privately.

The system architecture comprises three main layers: the Client Layer, the MPC Protocol Layer, and the Blockchain Settlement Layer. Each participant runs a client application that manages their secret share, communicates over a secure peer-to-peer channel (like libp2p), and interfaces with the blockchain. The MPC Protocol Layer handles the distributed key generation (DKG) to create the shared public address and the subsequent signing rounds. Critical operations like signing are performed via secure multi-party computation rounds, where parties exchange encrypted messages and perform local computations without exposing their secret data.

A typical swap flow involves several phases. First, Distributed Key Generation creates the shared wallet. Then, during the Negotiation Phase, parties use cryptographic commitments (e.g., hash locks) to privately agree on swap parameters. The Signing Phase involves an MPC signing round where both parties provide inputs to generate a transaction that atomically transfers assets according to the committed terms. Finally, the signed transaction is broadcast in the Settlement Phase. This architecture ensures privacy (details remain hidden), security (no single point of failure), and decentralization (no trusted third party).

Implementing this requires careful choice of libraries and frameworks. For the MPC cryptography, consider using established libraries like ZenGo-X's multi-party-ecdsa or Binance's tss-lib. The client logic can be built in Go or Rust for performance and safety. Communication between nodes must be authenticated and encrypted; libp2p provides a robust framework for this. On-chain, the settlement contract must be able to validate the threshold signature from the shared wallet. On Ethereum, this could be a smart contract wallet like Safe (Gnosis Safe) configured with the MPC-generated public key as an owner, or a custom contract using precompiles for signature verification.

Multi-party computation (MPC) allows a group of parties to jointly compute a function—like generating a digital signature—without any single party learning the complete private key. For private asset swaps, this enables a threshold signature scheme (TSS) where, for example, 2-of-3 participants must collaborate to sign a transaction moving funds from a shared wallet. This eliminates the single point of failure of a traditional multi-sig and keeps the signing key material distributed and never fully assembled. We'll implement this using the GG20 protocol for threshold ECDSA, which is the standard for secure, production-ready MPC.

Start by setting up the cryptographic foundation. You'll need a secure randomness source and elliptic curve libraries. We'll use the secp256k1 curve, the same as Bitcoin and Ethereum, for compatibility. Each participant runs a key generation ceremony to create their secret share. In Node.js, using the @toruslabs/tss-lib library, you initialize each party: const party = new Party(partyIndex, totalParties, threshold). The parties then engage in a Distributed Key Generation (DKG) protocol over secure peer-to-peer channels (using WebSockets or libp2p) to collectively generate a public key and individual secret shares. The public Ethereum address is derived from this shared public key.

Once the MPC wallet is established, authorizing a swap requires generating a signature collaboratively. When a swap is proposed—say, Alice wants to swap 1 ETH for Bob's DAI—the transaction data is hashed. The required threshold of participants (e.g., 2 out of 3) initiates a signing round. Each participant uses their secret share to compute a partial signature. A critical step is zero-knowledge proof generation to ensure each participant's share is valid and they are not cheating, without revealing the share itself. The partial signatures are then combined using Lagrangian interpolation to produce a single, valid ECDSA signature that can be broadcast to the blockchain.

Integrate this MPC signing flow into a swap protocol. The smart contract for the swap (e.g., a Hashed Timelock Contract) holds the assets. The MPC wallet's signature is required to release them. Your application logic must orchestrate the signing ceremony, manage state between participants, and handle network timeouts. For security, off-chain communication must be authenticated and encrypted, often using TLS or noise protocol. All participants must validate the transaction data independently before signing to prevent malicious payload attacks. Audit your implementation against known MPC pitfalls, such as rushing adversaries or biases in the random number generation.

Test your setup thoroughly before mainnet deployment. Use Ganache or a local Ethereum testnet to simulate swaps. Test failure scenarios: a participant going offline, submitting an invalid share, or attempting to front-run. Consider using a trusted setup auditor for the initial key generation in high-value applications. For production, leverage audited libraries like ZenGo's multi-party-ecdsa or Binance's tss-lib. Remember, the security of the entire system depends on the integrity of the threshold number and the secrecy of the individual shares, which must be stored in secure, isolated environments like HSMs or trusted execution enclaves.

Multi-Party Computation (MPC) is a cryptographic technique that allows multiple parties to jointly compute a function over their private inputs without revealing those inputs to each other. In the context of private asset swaps, this means two custody providers (e.g., Fireblocks and Copper) can facilitate a trade between their respective clients' wallets. The core computation—verifying balances, agreeing on a price, and authorizing the final atomic swap—is performed collaboratively using cryptographic protocols like GG18 or GG20, without either party exposing their private key material. The result is a signed transaction that executes atomically on-chain, transferring assets directly between the two custody wallets.

The technical setup begins with integrating an MPC SDK or library into your custody service's backend. Popular libraries include ZenGo's Multi-Party ECDSA (for Ethereum/Solidity) or MPC-based threshold signature schemes from vendors like Sepior or Unbound Tech. Your system must generate and manage secret shares of the private key, distributing them among the participating parties (often the two custodians and potentially a neutral third party for enhanced security). A typical flow involves: 1) initiating a swap session with transaction details, 2) performing the distributed key generation and signing ceremony via secure peer-to-peer messages, and 3) broadcasting the resulting on-chain transaction.

For developers, a basic integration involves setting up a Node.js service using a library like @zengo/mpc-ecdsa. After installing the package, you initialize participants and establish a communication channel (often using a secure websocket or a relayer). The code snippet below shows the initialization of a two-party signing ceremony for a simple ETH-USDC swap transaction:

javascriptCopy
const { MPC } = require('@zengo/mpc-ecdsa');
const party1 = new MPC.Party('custodian_a', privateShare1);
const party2 = new MPC.Party('custodian_b', privateShare2);

// Define the transaction to sign (e.g., a swap on a DEX)
const rawTransaction = {
  to: '0x...', // Swap router address
  value: '1000000000000000000', // 1 ETH
  data: calldata // Encoded swap function call
};

// Begin the collaborative signing protocol
const signature = await MPC.signTransaction([party1, party2], rawTransaction);

Key security considerations for MPC swaps include robust key management for the secret shares, secure peer-to-peer communication to prevent man-in-the-middle attacks, and implementing time-locks or abort protocols to handle cases where one party disconnects mid-ceremony. It's critical to conduct the computation off-chain, only publishing the final signed transaction. This preserves privacy (swap terms aren't visible until execution) and reduces on-chain footprint compared to hashed timelock contracts (HTLCs). Auditing the MPC implementation and using audited libraries is non-negotiable for institutional use.

Integrating MPC with existing custody solutions like Fireblocks or MetaMask Institutional often means leveraging their APIs for transaction signing within their secure enclaves. Instead of managing secret shares directly, you may call their MPC-as-a-Service endpoints to participate in the signing ceremony. The custody provider's infrastructure becomes one of the parties in the MPC protocol. This abstracts away the complex key management while still enabling the core benefit: executing a trust-minimized swap where neither custodian ever has full control of the other's assets, and the transaction details remain private until the moment of chain settlement.

The primary use case is Over-the-Counter (OTC) trading and inter-custodial settlements where funds must remain in regulated, insured wallets. By adopting MPC, institutions can participate in DeFi liquidity pools or execute large trades without the counterparty risk associated with depositing assets into a third-party smart contract. Future developments include integrating zero-knowledge proofs (ZKPs) with MPC to validate complex conditions (like proof of solvency) without revealing underlying data, further expanding the possibilities for private, secure financial operations between institutional entities.

The system you've built demonstrates the fundamental architecture: a coordinator service managing the MPC ceremony, threshold signature schemes like ECDSA or BLS for key generation, and zero-knowledge proofs to validate swap conditions without revealing sensitive data. This setup ensures that no single party controls the swap funds or can view the counterparty's private transaction details. The security model hinges on the assumption that a majority of the MPC nodes remain honest, a property enforced by the chosen threshold (e.g., 3-of-5).

For a production environment, several critical enhancements are necessary. First, implement robust key management and rotation policies to mitigate long-term key compromise risks. Second, integrate with secure off-chain oracle services like Chainlink to fetch accurate, tamper-proof price feeds for the swap calculation. Third, add comprehensive audit logging and monitoring for all MPC operations to detect anomalies. Finally, consider using specialized MPCaaS providers like Sepior, Unbound Tech, or ZenGo's library to reduce cryptographic implementation errors.

The next logical step is to test your system end-to-end on a testnet. Deploy a simple smart contract acting as the verification contract on networks like Sepolia or Goerli. This contract will verify the ZK proof submitted by the MPC coordinator. Use test tokens to simulate a full swap flow: initiating an order, running the MPC ceremony to create a signed transaction, generating the validity proof, and finally broadcasting the verified transaction to the blockchain.

To deepen your understanding, explore advanced MPC protocols. GG18 and GG20 are standardized protocols for threshold ECDSA, detailed in academic papers and implemented in libraries like Multi-Party EC-DSA by ZenGo. Research secure multi-party computation frameworks such as MP-SPDZ for general-purpose computations beyond signatures. Understanding these will allow you to customize the swap logic, perhaps to include complex conditional payments or privacy-preserving order matching.

The field of private decentralized finance is rapidly evolving. Follow the research and development from teams working on zk-rollups (Aztec, zkSync), confidential assets (Firo, Monero), and cross-chain MPC bridges (Thorchain). The integration of MPC with technologies like zk-SNARKs and trusted execution environments (TEEs) is pushing the boundaries of what's possible for private, scalable swaps. Your implementation is a foundation upon which more sophisticated, non-custodial privacy solutions can be built.